Most of my renters choose #1 because it provides a clean break.I document everything and I don't accept the early termination notice or start the clock until they pay the termination fee. 

That is simply not acceptable.

Convert the Property to a Primary Residence: If you live in the property for at least two of the five years before selling, you may qualify for the primary residence exclusion, which allows you to exclude up to $250,000 of capital gains ($500,000 for married couples) from taxation.4.

Since then she’s hired a lawyer because she felt that it’s unfair that shes only getting 30 days notice. she supposed to move out on the 26th of November she wants him to use the security deposit as last month rent but my friend runs the risk of the place being trashed if he does accept this will he still be able to fight for more money if the place does end up trashed and is there anything he can do to fight her to get the last months rent 

Even if that is not your intention, the IRS could decide that is what it was which would mean that the seller would have lost his 1031 ability since he "sold" you the house when he accepted the first payment.

The roofing company is at fault for not installing these and your PM should not have accepted their work without them.

If they are married/related yes, combining incomes to reach the goal is generally acceptable. 

If I were to hazard a guess, would be lucky to get 1 in 20 bids accepted. 

What loan terms will the seller accept?

That's very acceptable and reasonable.